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Friday, 31 December 2010

Ten men go to dinner - 2011...

There's a famous / infamous story of ten men going for dinner that many of the (unknowing) well off use to justify their desire to pay less tax. You can find the story & history here : How taxes don't really work

It's simple to understand and has had the middle class defending the ultra-wealthy's desire to pay less tax for about a decade.

I thought I'd try and update it for the financial hole we're in today...

This is a VERY simple way to understand the tax laws. Suppose that every day, ten men go out for dinner. They earn $1000 and the bill for all ten comes to $100, for that they get 20 potatoes.

If they paid their bill the way we pay our taxes, it could go something like this.

The first four men — the poorest — would pay nothing; between them they earn $9

The fifth would pay $1; he takes home $5

The sixth would pay $3; his pay packet contains $11

The seventh $7; his wedge every week contains $25

The eighth $12; he's flush with $40

The ninth $18; is bringing home $60 of bacon

The tenth man — the richest — would pay $59; he's a lucky man, he earns (and he works hard for it, you shouldn't pretend he doesn't) $850

The ten men ate dinner in a restaurant every day and seemed quite happy with the arrangement — until one day, the owner threw them a curve.

"We're screwed." he said." I've been buying all my potatoes from a man who had been selling potatoes for many a year. Normally he's kept some potatoes back for seed, but he realised last year that he could sell his kept back potatoes for more cash that it cost for seed potatoes, he couldn't lose!"

"Unfortunately it turned out everybody was doing this the price of seed shot up and his farm is now owned by loan sharks. He owes a packet, and I owe him money for the potatoes in my store room. Oh yes and as you well know the only food we have here in Pretendland is potatoes. We're buggered."

“Since you are all such good customers,” he said, "we're all in this together."

“I’m going to have to increase the cost of your daily meal by $20, and you're only getting 15 potatoes.

“So dinner for the ten now cost $120, and gave them 5 less potatoes yet the group still wanted to pay their bill the way we pay our taxes.

So the first four men were only affected in the fact they got 1/2 a potato less each. But remember potatoes are available on the free market for $5 each, so between them they could almost afford two. And they would still eat for free!

But what about the other six — the paying customers? How could they split the extra $20 they need to pay so that everyone would pay his “fair share?”

The six men realized that $20 divided by six is $3.33. But if they added that to everybody’s share, then the fifth and the sixth man wouldn't be able to buy a potato at home.

So the restaurant owner suggested that it would be fair to increase each man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

The fifth man realises that despite spending 12 hours in a potato field every day he's now earning less than the fourth man who has a cushy job selling mints in a city club toilet.

The sixth man starts feels aggrieved that he's spending 8 hours a day toiling in an office yet he can now afford less that 1 1/2 potatoes for his family. The top five prod him and tell him the bottom four are taking the piss out of him.

The seventh man can still afford three and a bit potatoes for the family, but is closer to three than he was before. He's now taking home $16.80 instead of $18, that's 3 2/3 potato instead of 3 2/5, they will no doubt notice the emptier plates.

The eighth man can still buy over five potatoes and the ninth more than seven potatoes.

The tenth man, if he wanted to could buy over 150 potatoes.

Each of the six was worse off than before, and the first four continued to eat for free. But once outside the restaurant, the men began to compare their losses

"Our families have less to eat!" decry nine of the men (Some of them do feel a little guilty in that the money they're losing wasn't earmarked for potatoes really. in one case it was set aside for a nice rug in the guest room.)

The tenth man glares at them with disdain.

"You're pathetic." He sneers "I have had to suffer much greater losses than any of you. I've lost over 35 potatoes. That's more potatoes than some of you would see in seventy wage packets. You should be crying for me."

The tenth man, incensed by his loss secretly went to the restaurant owner and told him straight.

"I decide the price of potatoes as I am the loan shark. I'll pay what I paid before and you'll pass the rest onto my friends and say nothing or risk having no potatoes."

And that, boys and girls, journalists and college instructors, is how the tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just let you die.

About Me

I'm an avid reader of the Daily Mail's website and its never ceasing quest to scare the bejeesus out of everybody.
This is my chance to try and redress the balance.
The world isn't as bad as they'd like to make out, and could be even better...